Brad Martyn Of FocusCFO On 5 Things You Need To Know To Successfully Scale Your Business

An Interview With Ken Babcock

Know your ceiling. I learned this one the hard way when I hit mine. There are a series of attributes that entrepreneurs have that allow them to be successful. People that have only worked in a business as a W-2 employee may think they know what it takes to be successful as an entrepreneur, but until you live it, you truly have no idea what it takes to be successful. I was guilty of this when I left the corporate world; I thought I knew it all and quickly realized I had no idea. But I sure do know now!

Startups usually start with a small cohort of close colleagues. But what happens when you add a bunch of new people into this close cohort? How do you maintain the company culture? In addition, what is needed to successfully scale a business to increase market share or to increase offerings? How can a small startup grow successfully to a midsize and then large company? To address these questions, we are talking to successful business leaders who can share stories and insights from their experiences about the “5 Things You Need to Know to Successfully Scale Your Business”. As a part of this series, we had the distinct pleasure of interviewing Brad Martyn.

Brad Martyn is the founder of FocusCFO (www.FocusCFO.com). Since founding FocusCFO in 2001, the company has grown to become one of the leading fractional CFO groups in the U.S. Prior to starting FocusCFO, Martyn worked for 18 years in various corporate financial and operating roles in public and private companies. He has seen firsthand how entrepreneurial companies successfully scale and how the organizations (and the entrepreneurs) adapt to these changes.

Thank you for joining us in this interview series. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’?

I was very fortunate in my pre-FocusCFO life to have worked in two highly entrepreneurial, mid-sized companies that were very professionally run. There I was able to watch the founders of these companies put together a leadership team to run the daily operations, and then stay involved to focus on their passions for the business and to champion the company culture. My 18-year career working in this type of corporate environment set the stage for me to have what Michael Gerber referred to in his book The E-Myth as an “entrepreneurial seizure”, where I jumped off the cliff and started our company, FocusCFO.

You’ve had a remarkable career journey. Can you highlight a key decision in your career that helped you get to where you are today?

There was a period in my late 30’s when my corporate role was to be on the frontline of a growth-oriented, acquisition strategy. It was just after the company had gone public and raised capital. Over a 24-month period, we acquired 17 companies, all small businesses with revenue in the $2 million to $20 million range. I spent a lot of time with these entrepreneurs, both before we acquired them and after. I loved their stories and their passion for their businesses. That set the stage for me to leave the corporate world and become an entrepreneur myself.

What’s the most impactful initiative you’ve led that you’re particularly proud of?

I am particularly proud of starting FocusCFO and then making the necessary changes to successfully expand to where we are today. When I started the company, like many entrepreneurs, I did everything. I had what I thought was a lot of relevant experience, from my corporate days and business school. I quickly learned that most of that didn’t help much. My battlefield lesson was that your business plan is always a draft and constantly being tweaked; that not every idea works, and you must be ready to pivot often and sometimes quickly. I learned not to let setbacks kill my confidence and to keep moving forward.

Probably the most important thing that I learned along the path to building a growing company was to recognize what I didn’t know and to surround myself with people who could help me. No one can do this on their own; we need to surround ourselves with others who have the expertise we lack and whose strengths supplement our weaknesses. Today, we have a leadership team that runs the company, and my job is to stay out of the way and let them do their jobs.

Sometimes our mistakes can be our greatest teachers. Can you share a mistake you’ve made and the lesson you took away from it?

For me it was assuming getting sales and customers would be easy. Too often businesses focus on their product first and not on finding their buyers. Keeping in mind that I was a CFO by training, I put together my first business plan for FocusCFO and remember feeling excited and like I had it all figured out. With my plan in hand, I flew from my home in Columbus, Ohio to San Francisco to meet with one of my business mentors from my corporate days. He was a big-time sales and marketing guy and was running a business. We sat in his conference room where I took him through my plan, in my black three-ring binder. I showed him my spreadsheets and opened my computer, making tweaks to my excel model.

After about 20 minutes of me going through my numbers he looked at me and said, “Brad, you need to put your computer away and just go get one customer. One. Then when you have one, go and get another. Then once you have 10 to 15 good customers you will know how to execute your sales plan and then you will have a business. Without sales, you have no business, and your business plan is worthless.” I still have that black three-ring binder today.

How has mentorship played a role in your career, whether receiving mentorship or offering it to others?

I was fortunate to have former associates and bosses who had been my business mentors, who took an interest in my success. When I started FocusCFO and was hit in the face with what I didn’t know, I was able to find the right people to mentor me and give me insights that were critical to our eventual success. It would not have happened without them.

Because of those experiences, I like to think I have always gravitated toward helping others and paying it forward. I have a passion for helping other entrepreneurs in the same way that others helped me. This approach has become a large part of our culture for FocusCFO — a shared passion for helping both business owners and anyone we connect with in our marketplace. I believe my personal story in starting our company from scratch and growing it to where it is today — with all the challenges and successes that came with it — is often very helpful to other entrepreneurs that I meet.

Developing your leadership style takes time and practice. Who do you model your leadership style after? What are some key character traits you try to emulate?

As we got started at FocusCFO, I quickly learned that our business was completely dependent on having people trust us. I developed a leadership style that is based on strong people skills and high Emotional Intelligence (EQ).

I had both attributes naturally but needed to refine them. I looked for people who I could learn from. No surprise, most of the people I found were women. Many women have naturally high EQ, are incredible listeners, and wonderful at sharing insights and giving advice. Because of that, I find that most of my role models are women and none of them are people you would know unless you run in my circle. They are exceptional in how they communicate, with a keen desire to help others. To me, it is really that desire to help others that sets people apart. No agenda, other than ‘how can I help?’ Those are the people I continue to learn from and emulate.

Thank you for sharing that with us. Let’s talk about scaling a business from a small startup to a midsize and then a large company. Based on your experience, can you share with our readers the “5 Things You Need to Know To Successfully Scale Your Business”? Please give a story or example for each.

As I look back at our FocusCFO journey and my experiences meeting with hundreds of business owners, these come to mind:

1. Always stay focused on your buyer. Too often when we start companies, we spend way more time on our product or service than we do finding our buyer. I quickly learned the need to do three things: First, identify and stay focused on your target market. Second, figure out how to continually get to them. And third, make certain you help them realize the problems you can solve. As we grow, it is important to not lose sight of your target buyer and how to continually help meet their needs. You must have a strong and consistent process for keeping your customers and finding new ones. To me, this is the single most important aspect of growing a business.
2. Focus on what you do best and get someone else to do the rest. As is the case with many startups, at first, I did it all. It worked, but only to a point. It wasn’t scalable. This is the trap so many entrepreneurs get caught in. They have the key relationships that lead to new customers. They oversee the product or service and make sure everything gets done the right way. They do the administrative work. But this isn’t scalable. To be successful, find that one thing that only you can do and spend at least 60% of your time on it. Then surround yourself with people who can take care of the other aspects of your business. I have never met a successful entrepreneur who could do everything in a growth environment. Successful entrepreneurs always put a team in place and get out of the way.
3. Develop an operating rhythm for the business. An operating rhythm is a regular routine for how you run the business, interact as a leadership team, and what you focus on. At FocusCFO, we use EOS, the Entrepreneurial Operating System developed by Gino Wickman and outlined in his book Traction. There are others, like Scaling Up and The Rockefeller Habits. It doesn’t so much matter which one you use, as long as you use one and commit to it. Annual goals, quarterly planning sessions, weekly accountability meetings, budgets, performance indicators, and a scorecard. It works if you do it right.
4. Know your ceiling. I learned this one the hard way when I hit mine. There are a series of attributes that entrepreneurs have that allow them to be successful. People that have only worked in a business as a W-2 employee may think they know what it takes to be successful as an entrepreneur, but until you live it, you truly have no idea what it takes to be successful. I was guilty of this when I left the corporate world; I thought I knew it all and quickly realized I had no idea. But I sure do know now!

For me, growth hit me like a ton of bricks. There was a point in our growth when I said I was done and couldn’t do it anymore. That was my ceiling. Fortunately, my advisors helped me understand that I needed to bring someone else in to run the business and free me up to do what I do best. Once this happened, it was like magic. I was able to match my creative energies with someone who has the skill set to run the day-to-day.

5. Have a strong CFO on your team. I don’t say this because it is what we do, but because I have seen first-hand what it costs businesses not to have a good CFO.

I have met too many business owners who put everything they have into trying to grow their business — mentally, physically, and financially — and then got stuck. It is heartbreaking to think about these entrepreneurs, who have nearly all their personal net worth tied up in their business, and ultimately are never able to achieve their retirement or legacy goals because they didn’t have anyone doing financial planning and strategy for their business. I see it all the time, but it doesn’t have to be that way.

Just like we use financial planners in our personal lives to help us with our financial plans, business owners need a CFO, who develops the financial plan for their business. A CFO can provide forward-looking financial strategy and help entrepreneurs understand the difference between net income (which is what the accountants focus on) and cash flow (which is what CFOs focus on). Without this guidance, businesses either run out of money or fail to grow their value. A CFO guides businesses on the climb to sustainable, transferrable value — value that an external buyer will actually pay for.

Can you share a few of the mistakes that companies make when they try to scale a business? What would you suggest to address those errors?

In my mind, there are really two:

1. Not connecting your business plan with a detailed financial plan that shows how the business plan will unfold over a 3 to 5-year period. The emphasis needs to be on working capital and cash flow, not just sales and net income.
2. Not understanding how much capital (i.e., funding, financing or cash) you need to reach your goals.

The two go hand in hand and highlight the need to have a high functioning CFO embedded in your business. Not someone with the title, but someone who has the real-life experience to do the job.

I attended a conference in Chicago a few years ago that was full of entrepreneurs and business owners. One of the breakout sessions was called “How to Grow the Value of Your Business”. The session was packed — over 300 people. The person leading the session was an investment banker from Texas. He stood in front of the room and the first thing he said was, “how many of you are business owners?” Every hand went up. “How many of you have a CFO?” 80% of the hands stayed up. Then he said, “I’m not talking about a controller who closes your books, or your CPA that does your taxes, but a true CFO that matches your strategy with your numbers and develops the forward-looking financial roadmap for your company.” Nearly every hand went down. He finished with, “it is impossible to maximize the value of your company without a CFO who matches your strategy with numbers.”

Every business, regardless of its size, needs an internal financial plan/roadmap and someone internally who understands the ins and outs of the business to quarterback that plan. That person is your CFO — either a full-time employee or a fractional CFO. But they must be a true CFO — not your controller or your outside tax accountant.

Scaling includes bringing new people into the organization. How can a company preserve its company culture and ethos when new people are brought in?

It all starts at the top and the culture leader in any organization needs to be the CEO. Even as things have changed at FocusCFO, with respect to what I do day-to-day, my primary role will always be to lead our culture. As we started to grow, we spent a lot of time identifying our core values. We then started to screen every member of our current team against our core values. We then did the same for every candidate we interviewed. It is only possible to maintain culture with the right people in the organization. We find we get it right most of the time with new people. But when we miss in the recruiting process, as hard as it can be, we ask them to leave.

In my work, I focus on helping companies simplify the process of creating documentation of their workflow, so I am particularly passionate about this question. Many times, a key aspect of scaling your business is scaling your team’s knowledge and internal procedures. What tools or techniques have helped your teams be successful at scaling internally?

You are absolutely correct. EOS, the operating system we use, has documented processes as its cornerstone. For us, it was a matter of taking the three to five key things we did and breaking them down into simple steps that were easy to understand and follow. We worked hard not to over-document, but to keep it simple and focused on the key elements. Each turned into a one-page graphic, which was simple and easy to understand. We then put more meat behind each one, but the starting point was visually oriented and simple.

What software or tools do you recommend to help onboard new hires?

There is a simple answer and then a complex one. On the simple side, it always makes sense to have a checklist when you onboard new associates. No matter how small or large your business, onboarding is a critical business process, and the steps need to be documented and followed. Joining an organization is a big career step for anyone, and we all want that to be a positive experience for our associates.

Over time, as things get more complex, the checklist will give way to more complex Human Resource departments and systems, but they both are based on best practices steps.

The complex part for us is once new associates are on board — how do we get them truly ON BOARD. How do we begin to assimilate them into our culture, our processes, and everything we do? We are a service company, and our people are everything to us and to our clients. In the early days, I did live training. Two or three days every month or so. Over time that became harder because of our geographic expansion and the demands on my time. So, I began to document and record everything. One of my passions became building out our onboarding and training systems. We found online platforms that could host the content and began to have other members of our team contribute to the content. Today, what we have is best in class. While some other professional services groups may have something as good, no one has anything better. We have documented what it takes to be successful in our industry and, today, we can go into any new geographic market and just launch.

We are constantly asking for feedback from our team and continually focused on making our onboarding and training systems better. I have said for many years that we have the fractional CFO industry about 80% figured out. Then we get better, learn more, and add more content and I still keep saying we have it 80% figured out. The more we learn and teach, the greater the opportunity we see for us to lead in our market segment.

Because of your role, you are a person of significant influence. If you could inspire a movement that would bring the most amount of good to the most people, what would that be? You never know what your ideas can trigger.

Thank you for the kind words. The number of people employed by small businesses in the U.S. is staggering and these businesses are a critical part of our communities and the economy. However, very few people actually understand how hard it is to successfully start, run and grow a business. Too often business owners don’t know where to go for education and expertise. I want more resources for entrepreneurs and business owners in our local communities, and I want service providers (attorneys, bankers, CPAs, marketing experts, sales coaches, wealth advisors) to come together with the goal of helping these entrepreneurs and business owners. Not to just generate fees, but to actually help. Entrepreneurs need access to the right people and advice. Let’s band together in our communities and help them.

How can our readers further follow your work online?

Follow us at www.FocusCFO.com or on LinkedIn. We are constantly posting content that is geared to helping business owners and their advisors.

This was truly meaningful! Thank you so much for your time and for sharing your expertise!

About the interviewer. Ken Babcock is the CEO and Co-Founder of Tango. Prior to his mission of celebrating how work is executed, Ken spent over 4 years at Uber riding the rollercoaster of a generational company. After gaining hands-on experience with entrepreneurship at Atomic VC, Ken went on to HBS. It was at HBS that Ken met his Co-Founders, Dan Giovacchini and Brian Shultz and they founded Tango.